Nonprofits Need an Exit Strategy

This post is written by Shital Shah, an August 2005 Fellow. Shital currently focuses on mobile financial services strategy with ShoreBank International.

Should nonprofits exist forever? With socially-oriented missions and as anchors in local communities, nonprofits play a unique role in addressing gaps where governments and markets may have failed. When there is a market to address that will provide a margin, businesses will exist as long as they are able to maintain profitability and their product or service holds relevance. Most businesses, however, do not exist in their current form into perpetuity. While not all exits are signs of success for a business, the concept of an “exit strategy” that is equivalent to success – being bought out, going public, selling shares – is seen as affirmation that the business is doing well and profitable enough to transition into a new form.

At the same time, the idea that nonprofits could similarly achieve an “exit” or even aim to actually “succeed” in their goals to remove themselves from the picture or transform into new models seems unrealistic. Take a look at any nonprofit’s mission – empowering young leaders, feeding the hungry, providing quality education to a low-income neighborhood. Turning those missions into reality seems unreasonable. Can nonprofits ever successfully “exit” and move on to set even higher standards for their approach or vision?

Why not?

When nonprofits exist for decades, questions are not raised about whether the organization is actually achieving its mission. Instead, nonprofits are often heralded for their decades of service to a community. Yes, the type of social change that nonprofits set out to achieve can take lifetimes to achieve, and their long-term commitment is worth encouraging. But should we also encourage creating vague mission statements around intractable challenges, or should we actually try to set and achieve social goals?

For the last nine months, I have been involved with the transition of Indicorps, a nonprofit that offers grassroots fellowships to people of Indian heritage to give their time and skills back to the development of India, their heritage country, recognizing that one of the greatest interventions to any challenge is people who work for a purpose greater than themselves (I also served as an Indicorps Fellow in 2005-2006). In December 2012, Indicorps announced its intention to transition from the current fellowship model, given its success as being instrumental to a movement that has connected individuals of Indian heritage back to India through service. At the same time, Indicorps announced that its next steps are without agenda and that the organization will seek to follow its own approach to “look, listen, and learn” before ideating and implementing.

The mixed reaction to the transition announcement is telling of the prevailing perceptions around nonprofits. Questions were raised, such as, “What’s the REAL reason Indicorps is closing its fellowship? Ran out of money? Can’t recruit fellows?” When we communicated that it was actually the opposite – no crippling issues, nothing broken, simply that we recognized that Indicorps had succeeded in the mission it set out to achieve – some remained thrown off and almost bewildered. There is a surprisingly common feeling of discomfort with the idea of a nonprofit achieving its goal and continuing to innovate. And who can blame the reaction – after all, “if it ain’t broke, don’t fix it!”

But that phrase alone discourages disruptive thinking and promotes complacency. Nothing is broken, and nothing is getting “fixed.” Instead, there is recognition that when Indicorps was originally created, the founders actually hoped Indicorps would become obsolete after ten years. While Indicorps’ unique fellowship may not be offered in exactly the same way through other programs, the service leadership landscape in India has been moving forward on a positive and irreversible track. This is fantastic and exactly the type of ecosystem Indicorps was hoping to contribute to shaping.

Is the year 2013 the same as the year 2001? Thankfully, it is not. The world has changed. Even as a nonprofit, Indicorps continually assessed the market and itself. Although the program evolved from year to year, the Board of Directors decided that the time was right to discontinue the fellowship to refocus resources and time, and consider how to set the bar even higher. Indicorps is exiting its fellowship program, having shared social gains with partner organizations, numerous communities around India, and with a variety of service programs that developed in the last decade. With this exit, Indicorps is ready to enter into a new form.

What would happen if nonprofits had an exit strategy? If “exits” were a sign of “success” for nonprofits, perhaps we would see better outcomes, shorter time frames for achieving impact, and maybe even more cost-efficient use of public and charitable money. Businesses exiting on a positive note in a short timeframe are seen as drivers of change and as companies that were able to derive healthy profits. In a similar way, can nonprofits offer enough social “profits” or gains to pass on the baton (to the communities themselves, other organizations, or to other sectors) and transition into new, disruptive, and innovative models? What are the different types of “exits” that nonprofits can consider? It would be a great start to have a conversation about how nonprofits are trying, or can try, to run themselves out of business in order to truly achieve their stated goals.

Let’s set the bar higher and, even as nonprofits, aim for an exit to truly benefit the communities and issues we wish to serve.